How to improve infrastructure delivery in the GCC?

building 768815 640Industry experts discussed effective approaches to deliver public infrastructure projects in the GCC region to meet the development visions of each country at a webinar, hosted by MEED and Oracle, “The outlook for infrastructure in the GCC - Between rightful selection of projects, delivery challenges and the role of technology”

With approximately US$495bn of infrastructure projects planned or underway in the GCC region, the panellists noted the limitations of the current infrastructure delivery model, which is focused on spending rather than productivity, and on short-term gains such as lowest price bidders winning the contracts.

Kenny Linn, partner – capital project services leader, PwC Middle East, said short-term value generation through procurement, fragmentation in the industry and low-profit margins would not sustain the ambitions of governments across the region against their vision statements.

"Market will look towards long term value of infrastructure. It needs to shift or transform towards that model," he said, adding that Saudi Arabia is moving from period of strategy-building – Vision 2030 – to its execution.

The panellists are optimistic about the growth of infrastructure in the GCC owing to a strong projects pipeline and markets recovering in line with oil prices.

Nour H Kassassir, vice-president and chief information officer of Parsons MEA Business Unit, Parsons, said, "For the next five years it is going to be a good promising outlook for infrastructure."

However, Nour pointed out that companies with low-profit margins will struggle if they are not investing in innovation for next projects. "Low margins, late payment and disputes are stifling innovation and capability building in the industry. That's why governments and the industry really need to work together to create supply and demands for technology."

Commenting on the current commercial model, he said that as it was focused on delivering services to clients as opposed to outcome-based strategies, taking advantage of technology to the fullest remains hard to achieve.

He said it requires the intervention of government as well as the collaboration of contractors to access or enable technologies such as Blockchain, 3D Printing or artificial intelligence in the construction industry. To just keep going with the status quo will not support the future development of infrastructure, he added.

A better strategy for procurement

The panellists underscored the fundamental issues with the present procurement strategy, as the projects are chunked into pieces such as design and construction over the 10 years before delivering it.

“This leads to no continuity in data transmission,” Nour said. With no common dataset across the entire supply chain to pass on throughout the project life cycle, the industry productivity remained low, Nour said. Additionally, bringing in the collaboration component into the contract agreement of the projects would lead to transparency, he said.

On the efficiency front, for every US$2tn spent on public projects, nearly US$600bn was going waste due to inefficient strategies in place, the experts noted.

Transferring risk to all

Sherief Elabd, director of industry strategy & innovation, Oracle Construction and Engineering, said that costs paid against disputes, claims, arbitrations are massive in this region. "It leads into massive delays in the projects [delivery], operations, discontinuity from stakeholders and termination of work."

Managing risk has to be collaborative, and all the stakeholders from owners to vendors should adopt the practice, he added.

The speakers agreed that private-sector finance would be a vital element of future infrastructure in the GCC. They said the governments must step up their efforts to provide commercially attractive infrastructure investment opportunities to private developers by bringing in transparency and encouraging collaboration. Additionally, modern software solutions must be used to manage every aspect of the project lifecycle and ensure data continuity across the supply chain.

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